Suppose a Firm Hires Both Labor (L) and Capital (C)

question 85

Multiple Choice

Suppose a firm hires both labor (L) and capital (C) under purely competitive conditions.The price of labor is PL, and that of capital is PC.The marginal product of labor is MPL, and that of capital is MPC.The firm sells its product competitively at a price of PX.In competitive labor markets, the marginal cost of an additional unit of labor

• A)is equal to PL × MPL.
• B)is equal to MPL/PL.
• C)is equal to PL.
• D)cannot be determined from the information given.Difficulty: 02 Medium

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Definitions:

Design Phases

Different periods within the process of developing a product or project, typically including concept, development, implementation, and evaluation stages.

Lowest Cost Solution

An approach or method that has the minimum possible cost among all the alternative approaches to achieve the same goal.

New Plant Addition

The establishment of an additional manufacturing or production facility to expand capacity or capabilities.

Total Construction Cost

The complete financial expenditure involved in constructing a building or infrastructure, encompassing material, labor, equipment, and indirect costs.